The Main Purpose of Reserve Requirements Today Is To

question 80

Multiple Choice

The main purpose of reserve requirements today is to:

• A)Decrease the demand for reserves
• B)Make sure depositors can withdraw currency on demand
• C)Enable the FOMC to keep the market federal funds rate closer to the target reserve rate
• D)Keep banks sound

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Definitions:

Vicious Circle

A complex chain of events that reinforces itself through a feedback loop, leading to a detrimental situation.

Poverty

The state of having inadequate income or resources to achieve a minimum standard of living.

Labor Productivity

A measure of economic performance that compares the amount of goods and services produced (output) with the number of hours worked to produce those goods and services.